Dendreon Shareholders Vent at Annual Meeting

Xconomy Seattle — 

Dendreon has had some triumphant annual meetings, where investors celebrated its work in creating the first FDA-approved drug that actively stimulates the immune system to fight cancer.

This wasn’t one of them. At today’s annual meeting at the Seattle Art Museum, there was a whole lot of disappointment, frustration, and scorn in the room.

Even after a rebound in the market today to more than $7, stock in the Seattle-based biotech company (NASDAQ: DNDN) has dropped more than 80 percent since last year’s annual meeting, when shares closed at $39.21. Back then, shareholders were excited about Dendreon ramping up its manufacturing capacity. But they have had to stomach some harsh reality ever since.

For starters, the company struggled to assure doctors will get reimbursed for prescribing its $93,000 drug, and as a result, it missed last year’s sales forecast by more than $100 million. When it became clear that Dendreon would miss its sales forecast last August, the stock crashed, and it still hasn’t recovered. The company laid off 500 workers, and a few months later, replaced CEO Mitch Gold with John Johnson, who has revamped the management team to engineer a turnaround for sipuleucel-T (Provenge).

In recent weeks, Dendreon has watched competitors enjoy their moments in the sun, as they presented promising results from clinical trials showing their drugs, like Dendreon’s, can extend the lives of prostate cancer patients.

The company is facing a litany of shareholder lawsuits from investors who lost a lot of money in Dendreon’s crash, and who are accusing certain insiders of enriching themselves by selling their stock before the fall, based on inside information. Besides the shareholder suits, the company disclosed in its most recent quarterly report that it is facing a formal investigation by the Securities and Exchange Commission, which Dendreon said “may relate to some of the same issues,” raised in the shareholder litigation.

With that tension in the room, the company kept today’s meeting short. Gold ran through some of the highlights from his tenure as Dendreon CEO, and made a series of gracious thank-you remarks in his last meeting as executive chairman (he will stay on the board for two more years). Gold’s remarks were followed by some brief comments from Johnson, and a warm-hearted video about a prostate cancer patient in Oregon. Johnson, although he was in an optimistic mood, didn’t try to try to pretend that the Dendreon story is all about candy canes and rainbows.

John H. Johnson, Dendreon CEO

“Pioneering comes with challenges,” he said. “We’ve learned from what we’ve hearing and seeing, and have adjusted.”

Dendreon didn’t allow recorders or cameras inside this meeting, and didn’t webcast the proceedings. What follows are some of the comments from shareholders that I jotted down with old-fashioned pen and paper.

—Brad Loncar, a shareholder activist from Lenexa, KS whose family has about 1,000 shares, started by welcoming Johnson to the company and expressing gratitude having him at the helm. But he criticized the board for failing in its job to watch out for shareholder interests.

“It’s unacceptable and very disappointing the way the board failed to exercise independent leadership over management,” Loncar said. He added: “A lot of good people were hurt while the management team walked away with an embarrassment of riches. This product deserves better.”

—Charlie Heffernan, a broker with Yates Wood & McDonald property management in Seattle, expressed his disgust with the management team. He said he owns about 10,000 shares of Dendreon, and has been a stockholder in the company for about eight years, partly because he believed in its “breakthrough science” and felt the need to support innovative companies in his hometown of Seattle.

He directed his anger at the board. “You have put the company at risk,” Heffernan said. “You all ought to be fired for cause.”

When asked afterward whether he was satisfied with any of the answers he heard from the company, Heffernan said no. “Just a bunch of chickenshit,” he said.

—Rob Walker, who described himself as a prostate cancer survivor and long-term shareholder who currently has 110,000 shares, started with some diplomatic comments about how he understands the value of the product. But he vented his frustration when he had his turn at the microphone.

“I wish I was as good at selling stock as some of the executives at the firm,” Walker said.

Walker didn’t necessarily agree with all the company’s critics, noting that “a lot of false things are said in chat rooms, which people rely on,” for information about the company. He tried to encourage the management team to be more transparent with investors, and do a better job of managing expectations.

“The stock deserves to be substantially higher, and it would be if the company hadn’t been overoptimistic and burned people,” Walker said. He added: “If you do your work, the stock will take care of itself.”